B-170955, NOV. 10, 1970

B-170955, NOV. 10, 1970

MISTAKE IN BID - RELIEF AUTHORIZING CANCELLATION OF SALES CONTRACT WITH COMMERCIAL METALS COMPANY INCIDENT TO SALE OF SURPLUS BATTERIES, ELECTRONIC PARTS, ETC., ON BASIS OF ERROR ALLEGED AFTER AWARD. A HIGH BIDDER WHOSE BID WAS 55 TIMES THE SECOND HIGH BID FOR BATTERIES THAT HAD SCRAP VALUE ONLY BECAUSE THE BIDDER ASSUMED THAT THE TYPE NUMBER REFERRED TO MERCURY-TYPE RATHER THAN ALKALINE-TYPE BATTERIES MAY HAVE CONTRACT CANCELLED AND LIQUIDATED DAMAGES REFUNDED SINCE DISPARITY OF PRICES AND VALUE OF ITEM SHOULD HAVE PLACED CONTRACTING OFFICER ON NOTICE OF PROBABILITY OF ERROR WHICH WOULD REQUIRE VERIFICATION.

TO GENERAL HEDLUND:

REFERENCE IS MADE TO LETTER DATED OCTOBER 2, 1970, WITH ENCLOSURES, FROM THE ASSISTANT COUNSEL, SUBMITTING FOR OUR DECISION A REQUEST BY COMMERCIAL METALS COMPANY (COMMERCIAL) FOR RELIEF FROM A MISTAKE IN BID ALLEGED AFTER AWARD OF THE SALES CONTRACT WAS MADE BY THE DEFENSE LOGISTICS SERVICES CENTER, DEFENSE SURPLUS SALES OFFICE (DSSO), NORFOLK, VIRGINIA.

THE NORFOLK OFFICE ISSUED SALES INVITATION FOR BIDS NO. 25-0086 COVERING 95 ITEMS OF SURPLUS BATTERIES, CABLES, ELECTRONIC PARTS, MOTORS, TRANSFORMERS AND OTHER ITEMS OF A SIMILAR NATURE. AMONG THE ARTICLES LISTED IN THE SALES INVITATION WAS ITEM NO. 37, OFFERED AS A "LOT," DRY BATTERIES, CONSISTING OF 200 TYPE 303602, MALLORY BATTERY CO., AND 900 TYPE ROV12, RAY-O-VAC. THE SOLICITATION STATED THE TOTAL COST OF THE BATTERIES, NEW, WAS $4,825 AND THE ESTIMATED TOTAL WEIGHT WAS 1,910 POUNDS. BIDS WERE OPENED ON APRIL 29, 1970, AND COMMERCIAL WAS THE HIGH BIDDER ON ITEM NO. 37 WITH A BID OF $1,377.77 FOR THE LOT. THE SECOND HIGH BID ON ITEM NO. 37 WAS $25 WHILE THE THIRD HIGHEST BID WAS $17.77. AWARD OF SALES CONTRACT 25-0086-002 WAS MADE TO COMMERCIAL ON MAY 6, 1970.

BY LETTER OF MAY 27, 1970, COMMERCIAL NOTIFIED DSSO THAT IT HAD MADE A MISTAKE IN ITS BID AND REQUESTED PERMISSION TO WITHDRAW ITS BID FOR ITEM 37. IN ITS LETTER, COMMERCIAL STATED THAT IT ERRED BY ASSUMING THAT THE BATTERIES WERE MERCURY BATTERIES BECAUSE THE FIRST THREE DIGITS OF THE TYPE NUMBER, 303, NORMALLY INDICATE A MERCURY BATTERY, WHEN, IN FACT, THE BATTERIES WERE OF AN ALKALINE TYPE. COMMERCIAL DOES NOT CLAIM THAT THE ITEM WAS MISDESCRIBED IN THE INVITATION. RATHER, IT MAINTAINS, BASED ON PAST EXPERIENCE, THAT MALLORY BATTERIES BEARING SIX DIGIT NUMBERS PRECEDED BY 303 ARE MERCURY BATTERIES. HENCE, COMMERCIAL STATES THAT ITS BID WAS BASED ON AN ERRONEOUS ASSUMPTION.

IT IS ADMINISTRATIVELY REPORTED THAT ALTHOUGH THE BATTERIES WERE OFFERED AS USABLE PROPERTY, DSSO ANTICIPATED THAT THEY HAD NO VALUE OTHER THAN SCRAP AND HAD ESTABLISHED NO CURRENT MARKET APPRAISAL FOR THE ITEM.

IT IS FURTHER REPORTED THAT THE CONTRACTING OFFICER REQUESTED THE HOLDING ACTIVITY TO VERIFY THE ACCURACY OF THE DESCRIPTION OF THE 200 EACH MALLORY BATTERIES. THE CONTRACTING OFFICER WAS INFORMED THAT ITEM 37 WAS CHECKED AND THE DESCRIPTION WAS VERIFIED AS CORRECT. IT IS THUS ESTABLISHED THAT THE TYPE 303602 BATTERY IS AN ALKALINE-TYPE AND NOT A MERCURY-TYPE BATTERY.

ON JUNE 3, 1970, DSSO ISSUED A DEFAULT NOTICE TO COMMERCIAL SINCE NEITHER PAYMENT NOR REMOVAL HAD BEEN EFFECTED. ON JUNE 29, 1970, COMMERCIAL WAS NOTIFIED BY DSSO TO REMIT $275.55 AS LIQUIDATED DAMAGES. BY CHECK, ACCOMPANYING A LETTER DATED JULY 10, 1970, COMMERCIAL PAID THE AMOUNT CLAIMED AS LIQUIDATED DAMAGES.

ORDINARILY, A WIDE RANGE OF BID PRICES IN SURPLUS PROPERTY SALES IS NOT DEEMED TO BE CONSTRUCTIVE NOTICE OF ERROR BECAUSE OF THE MANY POSSIBLE USES TO WHICH THE PROPERTY MAY BE PUT. B-169254, MARCH 25, 1970. HOWEVER, THE CONTRACTING OFFICER HAS REPORTED THAT BATTERIES ADVERTISED UNDER ITEMS 34 THROUGH 38, WITH THE EXCEPTION OF ITEM 37, RETURNED AN AVERAGE OF 4.855 PERCENT, WHILE COMMERCIAL'S PRICE OF $1,377.77 ON ITEM 37 RETURNED 28.55 PERCENT. ALSO, COMMERCIAL'S PRICE ON ITEM 37, $1,377.77, IS 55 TIMES THE SECOND HIGH BID OF $25 ON ITEM 37. FROM THE FOREGOING, THE CONTRACTING OFFICER HAS CONCLUDED THAT HE SHOULD HAVE BEEN ON NOTICE OF THE POSSIBILITY OF MISTAKE IN BID WHICH WOULD HAVE REQUIRED HIM TO VERIFY THE BID.

WE AGREE THAT THE DISPARITY BETWEEN COMMERCIAL'S HIGH BID AND THE OTHER BIDS RECEIVED ON ITEM 37, AND THE FACT THAT DSSO ANTICIPATED THAT IF ANY BIDS WERE RECEIVED THEY WOULD COVER SCRAP VALUE ONLY, SHOULD HAVE PLACED THE CONTRACTING OFFICER ON NOTICE OF PROBABILITY OF ERROR AND, THEREFORE, BID VERIFICATION SHOULD HAVE BEEN REQUESTED. B-158334, JANUARY 21, 1966.

ACCORDINGLY, SALES CONTRACT NO. 25-0086-002 MAY BE CANCELED WITHOUT LIABILITY TO COMMERCIAL, AS ADMINISTRATIVELY RECOMMENDED, AND THE SUM OF $275.55 COLLECTED AS LIQUIDATED DAMAGES MAY BE REFUNDED. A REFERENCE TO THE DECISION SHOULD BE MADE ON THE VOUCHER COVERING THE REFUND OF THE SUM REPRESENTING LIQUIDATED DAMAGES.